Greetings, and welcome to the Acurx Pharmaceuticals discussion on Second Quarter 2023 Financial Results and Business Update. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Rob Shawah, Chief Financial Officer. Thank you, sir. You may begin.

Thank you. Good morning and welcome to our call. This morning, we issued a press release providing financial results and company highlights for the second quarter of 2023, which is available on our website at acurxpharma.com. Joining me today is David Luci, President and CEO of Acurx, who will give a corporate update and outlook for 2023. After that, I'll provide some highlights to the financials from the quarter ended March 30th, and then turn the call back over to Dave for his closing remarks. As a reminder, during today's call, we'll be making certain forward-looking statements. These forward-looking statements are based on current information, assumptions, estimates and projections about future events that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. Investors should consider these risks and other information described in our filings made with the Securities and Exchange Commission, including our quarterly report on Form 10-Q, which we filed on Friday August 11, 2023. You are cautioned not to place undue reliance on these forward-looking statements and Acurx disclaims any obligation to update such statements at any time in the future. This conference call contains time-sensitive information that's accurate only as of the date of this live broadcast today, August 14, 2023. Acurx undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date and time of this conference call. I'll now turn the call over to Dave Luci. Dave?

Thanks, Rob. Good morning, everyone, and thanks for joining us to review our financial results for the second quarter of '23 and also to cover some recent updates, then we'd be pleased to take any questions. In the second quarter of 2023, we continued to enroll more patients in the Phase 2b clinical trial of our lead antibiotic candidate ibezapolstat for the treatment of patients with C. difficile infection or CDI. We're pleased to report we now have enrolled 31 patients in the Phase 2b trial. Only five more patients need to be enrolled to trigger an interim data review by an Independent Data Monitoring Committee that we appointed in the first quarter of ‘23 for this purpose. The IDMC will review the data upon the 36th patient being evaluated for the primary endpoint of clinical cure at the end of treatment and will provide us a recommendation either to early terminate the 2b trial as we had done with the Phase 2a trial or alternatively to continue enrolling. We will report the IDMC recommendation after the interim review of the data. If the IDMC recommends early termination of the 2b trial, we will report the top-line data along with the primary endpoint and safety data when the 36th enrolled patient completes treatment. We anticipate completing enrollment of the 36 patients for the interim review in the coming month or two. Operationally, we're pleased to report that the blinded observed data from the Phase 2b trial has been exceptional and the trial is proceeding as expected with no safety signals reported to-date. The Phase 2b trial protocol includes an exploratory endpoint comparing the impact on the microbiome between ibezapolstat and standard-of-care oral vancomycin. In the event non-inferiority of ibezapolstat to vancomycin is demonstrated, further analysis will be conducted to test for superiority. Due to slower-than-expected enrollment during the COVID-19 pandemic and its aftermath, we expanded the number of trial sites participating in the 2b trial from the initial 12 sites up to 28 sites. This expansion has resulted in increased screening in the past couple of months. In March 2023, the FDA accepted our protocol amendment to our IND, which will allow an Independent Data Monitoring Committee to review the interim data that's been pre-cleared with the FDA. We remain particularly excited about the dual impact of ibezapolstat to treat the acute C. difficile infection while appropriately managing the long-term care of each patient's microbiome, which we believe is exceptional for antibiotic therapy. Other key highlights from the second quarter of ‘23, or in some cases shortly thereafter, include the following: In April of this year two presentations were made at the 33rd Annual European Congress of Clinical Microbiology and Infectious Disease (ECCMID) in Copenhagen. The first was a poster entitled “Novel Pharmacology and Susceptibility of Ibezapolstat Against C. diff Isolates with Reduced Susceptibility to C. diff Directed Antibiotics,” presented by Dr. Kevin Gary, Professor and Chair at University of Houston College of Pharmacy and the Principal Investigator for microbiome aspects of our ibezapolstat clinical program. Dr. Gary’s work demonstrated that ibezapolstat’s mechanism of action is not only bactericidal to C. diff but also inhibits some of its virulence mechanisms. Dr. Gary noted that C. diff strains with reduced susceptibility to any of the other antibiotics used to treat C. diff—metronidazole, vancomycin, or fidaxomicin—were still susceptible to ibezapolstat. Ibezapolstat is able to successfully kill C. diff bacteria that in many cases is resistant to other antibiotics. Ibezapolstat’s antivirulence effect—namely reduced flagellar movement of the C. diff organism—was a positive unexpected finding reflecting the unique mode of action in inhibiting DNA pol IIIC. In a second presentation at ECCMID, Acurx Executive Chairman Bob DeLuccia presented an update regarding the Company's preclinical, systemic oral and IV program for treatment of other gram-positive infections caused by MRSA, VRE and DRSP at the "Pipeline Corner" featured session organized by Dr. Ursula Theuretzbacher, a world-renowned microbiology expert involved in antibacterial drug research and development strategies. Bob summarized the progress of the company's gram-positive Select Spectrum Program. Both posters are available on our website. Additionally, in the third quarter, we were notified by CARB-X that we did not receive funding approval in their recently closed ‘23 omnibus funding round for our second antibiotic candidate ACX375C, which is in preclinical development. We did appeal this decision based on certain modifications to the scope of our program; however, CARB-X governance structure did not allow for acceptance of an appeal process. CARB-X noted that the ‘23 round of funding was very competitive and that their Scientific Advisory Board was enthusiastic about Pol IIIC as the bacterial target of our molecules and the sufficient PK and safety properties of the compounds that justified the proposed lead optimization plan. CARB-X encouraged us to reapply for future Requests For Proposals or RFPS that CARB-X will continue to promote from time to time for funding consideration. While this news was disappointing, we will continue to monitor and apply for grants from all funding sources as they become available. Now looking forward, the upcoming Antimicrobial Resistance Congress is next month. It will convene its Annual Meeting in Philadelphia where experts in the field will weigh in on the latest innovations to address antimicrobial resistance. This is the world's largest conference for all stakeholders combating antimicrobial resistance, and our Executive Chairman will speak at the innovation showcase section of the conference on September 7th and present an update entitled “Novel DNA Pol IIIC Inhibitors for Gram-Positive Bacterial Infections Preparing for the Next Pandemic”. That presentation will also be available on our website. Additionally, we have IDWeek coming up with the Infectious Disease Society of America convening its Annual Meeting from October 11 to 15 in Boston. Acurx will be featured at two scheduled events. First, an oral presentation by Dr. Kevin Gary will be given on October 14th entitled Elucidating The Gram-positive’s Selective Spectrum Activity of ibezapolstat: Secondary Analysis from the Phase 2a trial. Secondly, Acurx will present at the Symposium titled “New Antimicrobials in the Pipeline” on October 12, which will address “Novel DNA Pol IIIC Inhibitors For Gram Positive Bacterial Infections”. After these presentations, the materials will be available on our website. Now, regarding the PASTEUR Act. As we've discussed previously, the Bipartisan PASTEUR Act continues to generate news and enthusiasm in Washington DC. On April 27th, US Senators Michael Bennet and Todd Young reintroduced the PASTEUR Act to encourage innovative drug developments targeting the most threatening infections, improve the appropriate use of antibiotics, and ensure domestic availability of antibiotics when needed. On July 11th, a Senate Subcommittee hearing was convened and led by Senators Markey and Marshall, highlighting the need to address antimicrobial resistance to superbugs, including MRSA and C. diff. Accordingly, we're quite enthusiastic about the prospects of the PASTEUR Act being passed into law because of the national spotlight and the dire need for new classes of antibiotics to treat serious and life-threatening infections. Now back to our CFO, Rob Shawah, to guide you through the highlights of our financial results for the second quarter of 2023. Rob?

Thanks, Dave. Our financial results for the second quarter ended June 30, 2023, were included in our press release issued earlier this morning. The company ended the second quarter with cash totaling $9.1 million, compared to $9.1 million as of December 31, 2022. Research and development expenses for the three months ended June 30, 2023, were $1.7 million compared to $0.9 million for the three months ended June 30, 2022. The increase was due to an increase in Phase 2b trial-related costs. For the six months ended June 30, 2023, research and development expenses were $2.8 million versus $1.7 million for the six months ended June 30, 2022. The increase is primarily due to Phase 2b trial-related costs and an increase in consulting costs. General and administrative expenses for the three months ended June 30, 2023, were $1.7 million, compared to $1.7 million for the three months ended June 30, 2022. The expenses reflect a slight decrease in professional fees of $0.1 million, offset by a slight increase of $0.1 million in employee compensation-related costs. For the six months ended June 30, 2023, general and administrative expenses were $3.6 million compared to $3.6 million for the six months ended June 30, 2022. This amount reflects a decrease in professional fees of $0.2 million, offset by an increase of $0.2 million in employee compensation-related costs. The company reported a net loss of $3.4 million or $0.28 per diluted share for the three months ended June 30, 2023, compared to a net loss of $2.6 million or $0.26 per diluted share for the three months ended June 30, 2022 and a net loss of $6.3 million or $0.53 per diluted share for the six months ended June 30, 2023, compared to a net loss of $5.3 million or $0.52 per diluted share for the six months ended June 30, 2022—all for the reasons previously mentioned. The company had 13,000,5128 shares outstanding as of June 30, 2023. With that, I'll turn the call back over to Dave.

Thanks, Rob, and to all of you joining us today. We outlined the advances in several areas that we believe will spur continued momentum and growth and build on our strong fundamentals. We look forward to sustaining this momentum even during these challenging times and sharing future updates and results in the coming months. I will now open the call for any questions. Operator?

Thank you. Our first question comes from Ed Arce with HC Wainwright. Please proceed with your question.

Hi, good morning, everyone. This is Thomas Yip asking a couple of questions for Ed. Thank you for taking our questions.

Hi, Ed. Good morning.

Perhaps first with the Phase 2b study – hey, good morning. It’s good to hear the update for Acurx. So back in March, the guidance for the Phase 2b interim review was anticipated mid-year 2023. Can you outline some major factors that are behind this shift in timing and also some remedies that you are implementing to address it?

Okay. Tom, I mean, I think the question is about 180 degrees in the wrong direction, I'm sorry to say. If you check your notes, I think you'll find that on May 14th in the first quarter, we guided folks that we would be done in the second half of 2023, and if anything today, we've guided folks that we're going to be done before that.

Okay. So the latest, yes, I do remember the latest guidance was second half. So you mentioned the coming months, so does that sound more like a third quarter or early fourth quarter event?

Yes. Yes. So, when I say before that, I mean, before the end of the second half. But yeah, we do think that it will be in the coming— as I mentioned in the coming month or two. We've had significantly better enrollments. We’ve plugged a new CRO into special situations and we’re starting—that started to bear fruit including a substantial increase in the number of patients that are screened. So it may be also in combination a bit with COVID being further and further behind us, and maybe some of the behavioral patterns are changing back. So in any event, whatever the cause is, we are screening more patients and we don't think we have far to go.

Got it. Then, you mentioned there for the Phase 2b interim analysis there is a new IDMC. Can you give some details on the members of this board? And is it the same core members as the IDMC for the Phase 2a study?

Okay. Yeah, no, we don't give out the names of the members. But just to be clear, for the Phase 2a study, the 2a trial was early terminated on the recommendation of our Scientific Advisory Board, which is included in our slide deck and on our website. But for the Phase 2b trial, we created a separate Independent Data Monitoring Committee and these are all independent scientific experts in infectious disease and, in one case, a statistician—none of whom have shares in our company or get paid by our company. They are doing this as a public service. That's the constituency of the IDMC. It's different people in every case than those who served as Scientific Advisory Board members currently for the company and who will opine on the 2a trial.

Okay. Understood. Thank you for the clarification. Perhaps, one question regarding the CapEx funding? Sorry to hear that the recent funding did not advance to the next round. In order to be eligible for future grants, do we need a new program or do we plan to continue with at least 75% eligibility?

No. So, for each grant, whether by CARB-X or other folks like NIH, to be eligible, you have to look at the RFP, the Request For Proposal. So with CARB-X in particular, this was the first CARB-X grant RFP in years that allowed folks who are developing antibiotics that target treatment of gram-positive bacteria infections, not just gram-negative. So, we were excited to see that the scope of the RFP has expanded to include sponsors like us. I mean, we expect based on our conversations with CARB-X that that will continue. And as we continue to develop our drug and it gets through lead optimization, we think our candidacy will become more and more compelling in these challenging times for funding.

Excellent. Okay. Perhaps one last question from us, this one is financial. It sounds like, as you mentioned earlier, the interim analysis seems to be occurring really soon. So, cash runway should expand beyond that. Can you give us, perhaps a more specific timeframe for approximate cash runway?

Sure, Tom. I think our cash runway is sufficient through Q3 of 2024 and kind of and then some. So, we are burning $2.1 million, $2.2 million per quarter and that’s during the quite expensive 2b trial times. So, once the 2b trial is over, we should eliminate probably $1 million from that $2.1 million to $2.2 million quarterly burn. So, if you take $2.2 million and you flat line it for four quarters, that's $8.8 million. So, even if the 2b for some reason got extended enormously long, we'd have money through Q3. Given where we are, we probably have money all the way through ‘24 because the 2b trial will be over.

Okay. Understood. Thank you for taking our questions. And I'm just looking forward to the interim analysis for the Phase 2b study.

No problem, Thomas. If you have any other questions, just give me a call or shoot me an email and we'll connect.

Definitely. Thank you.

Thank you. Our next question comes from the line of Jason McCarthy with Maxim Group. Please proceed with your question.

Hey guys. This is Michael Okunewitch on the line for Jason. Thank you so much for taking my questions today.

No problem. Thanks for calling, Mike.

Yeah. I'd like to see if you could talk a little bit more about the specifics of the PASTEUR Act. Obviously, just a validation of the problem, and that Congress is paying attention to this is huge in itself. But what specifics have been suggested that could aid in clinical development and uptake of new anti-infectives, particularly as it relates to Acurx?

Sure. No problem, Mike. I think this is the transitional piece of legislation that would completely redefine the antibiotic sector in the United States. Just to be perfectly clear, this puts antibiotics back on par, profit-wise, revenue-wise with cancer drugs, diabetes drugs, and neurological drugs for ALS and other neurological disorders. It's a game changer. So what the PASTEUR Act does generally, and there's also a PASTEUR Light that I'll get to, the PASTEUR Act, if approved, is a pull incentive, similar to the pull incentive already approved and made law in the UK a few years back. What the pull incentive does is say, hey, sponsors of new antibiotics and those who invest in them, if you take your time to develop an antibiotic for a life-saving or serious clinical indication that is a new class of antibiotics—not just a new generation of amoxicillin, an old class—if that's what you have, we will pay for Phase 3, including all the manufacturing for Phase 3, and we will give you between $750 million and $3 billion over a ten-year period to stockpile your antibiotic at Public Health Facilities under a license agreement with Health and Human Services. The PASTEUR Light would be basically half of that, so it would be $375 million minimum up to $1.5 billion for each sponsor of QIDP, an antibiotic that treats serious or life-threatening infections and is a new class of antibiotics. Each sponsor can only get one designation under the PASTEUR Act. To get the designation, you receive a letter from HHS after you apply and get accepted. That letter includes a dollar amount, which, under the current draft of the law, for the PASTEUR Light, will be at least $375 million over 10 years, and the amount between $375 million and $1.5 billion will be determined by HHS based on a formula to be provided in the law. That formula will aim to quantify the savings to the public health system in the US by having your antibiotic approved to treat serious and life-threatening infections. In the case of C. difficile, the reinfection market is estimated to cost $4.7 billion annually to the US Public Health system. So, if we develop a frontline antibiotic capable of achieving close to a 100% cure rate and zero re-infections, that would present significant savings to Public Health in the US. That’s a full $4.7 billion cost of the C. diff reinfection market every year in the US. At the very least, it would ensure $375 million for us—$37.5 million annually for 10 years. So, as a company with a market cap of around $30 million, you can see if we were designated as a critical need antimicrobial under the PASTEUR Act, it would be an absolute game changer.

Certainly, there's a lot of potential there. And just a follow-up on the Phase 2b. I’d like to see if you could provide more color on the potential to possibly stop it early on efficacy. What would need to be demonstrated? And then expand a little bit on how you can use changes in the microbiome, in addition to the primary endpoint to support a readout on a study?

Okay. Great. No problem. So the microbiome changes—that's the easier question, so I'll answer it first. We see the full restoration of a healthy microbiome in C. diff patients we've treated by the end of the third day of a treatment regimen on our drug, and that's from the Phase 2a trial. We have no reason to expect that will change because of the scientific underpinning of no re-infections. Why are there no re-infections? Because we're fully restoring the microbiome by day three of treatment. How are we re-restoring the microbiome? We have a very narrow spectrum antibiotic that's only able to kill C. diff, leaving all the other classes of healthy bacteria in the gut alone, providing an environment where they can repair themselves. Unlike the standard-of-care antibiotics like vancomycin, which decimate the healthy microbiome while curing the C. diff infection, putting that patient at high risk for a re-infection. Based on that, we believe the microbiome is a big part of the story because it will help us avoid re-infections. Although it's a secondary endpoint, it's significant. The primary endpoint of cure at end of treatment measures plus or minus two days, at day 12 or 11, reflects the fact that we're delivering over 100 times the concentration of our medicine to the site of the C. diff infection in the colon than is needed to kill the bacteria based on our MICs. That's why—this is the underpinning for our success at killing the bacteria at end of treatment and that’s the primary endpoint. We expect that to continue when we read out the 2b data. The 31 patients evaluated had tremendous blinded observed data. Our statisticians say if there are up to two patients who are not cured out of the 36 evaluated at the interim, even if those two patients were on our side of the trial, we would still achieve statistical non-inferiority. On that basis, given we have 65 years of clinical trial data to look at for how vancomycin performs in our trial, which has never exceeded 92% and has been as low as 70% over 65 years, we expect it to fall in the low 80s. So, we’re feeling very optimistic about the potential outcomes from this trial. Furthermore, one should consider the intrinsic value of this drug in the C. diff market to big pharma, given a $1.7 billion market opportunity with a clear shot at frontline therapy. You should contemplate what's that worth? For instance, the Tillots Pharma acquisition of the EU rights to Merck's fidaxomicin was valued at about $125 million in 2022, and that was just for European rights. We have rights in the US, Europe, and Japan. Additionally, you could refer to the March 23 Sabel Pharmaceuticals deal, which had a total value of $570 million for acquiring Destiny Pharma, which was a much less advanced development program than we have. The intrinsic value here is quite high. We just need to get through this binary Phase 2B trial readout, and we’re really excited about what lies ahead.

All right. Thank you. I really appreciate your additional insights here.

No problem. Thank you, Mike.

Thank you. And our next question comes from the line of Jim Molloy with Alliance Global Partners. Please proceed with your question.

Hi, good morning. Thanks for my question. I had a question on CARB-X. You walked through what the next steps are for 375C. Is there an opportunity to move forward absent the CARB-X funding? And when did CARB-X notify you guys that they weren't going to proceed forward with 375?

CARB-X notified us a couple of weeks ago, late in July. We followed up with questions and an appeal, which took a couple of weeks to navigate through. So the timing is perfect for this call. But the program never stops. We continue to evaluate and work on the lead optimization process, which is why I say that as that process continues and gets to completion, we will have a stronger opportunity at the next CARB-X RFP. If it includes a gram-positive treating antibiotic, we will reapply with a more compelling package. We feel that because we weren’t rejected back in April, we’re on the bubble and just need to push forward.

What do you expect the next opportunity to apply for CARB-X funding will occur? It sounded like it was a bit up in the air.

Well, they typically release an RFP every November. There may be other RFPs from time to time, but pretty much every November they seem to come out with an RFP that would be noted. The only question will be whether that RFP continues to include gram-positive treating antibiotics. If it does, we will reapply in the fourth quarter and hopefully receive positive reconsideration from April.

Got it. Thank you. Then on the Phase 2b, how long from the fifth and final patient—the 36th patient—for the final date or final notification from the IDMC on what next steps are?

If you assume the 36th patient came in today, that 36th patient would be out of the study ten days from today. They would then be evaluated for the primary endpoint two days thereafter. So, that would be 12 days from today. After that, the IDMC will meet—day 13, day 14—and come back with their recommendations. As soon as we have that recommendation, we'll issue a press release. First, regarding the 36th patient, and soon after, the IDMC recommendation and the company's decision based on their recommendation.

It seems like a positive sign for potential early termination given the historical data on vancomycin and the data you guys are seeing, even though it's still blinded. Assuming you have to run—if you get, get the 36 enrolled patients like halfway through—what's the thinking going forward on that? And what's your ability to fund that second half of this trial if it’s needed?

Yeah. I mean, if we have to go to the 72 patients, we will be able to continue to run the trial in the ordinary course. As I mentioned, if our ongoing cost is $2.2 million per quarter, that's fine. We could raise a tiny amount of money, $5 million, whatever the number might be, to pick up some international sites and pay for them—expanding into Eastern European and Canadian sites. Following up from how Therapeutics managed to enroll quickly during COVID, they opened international sites in regions that weren't heavily impacted by the pandemic. We would do the same if we had to add another 36 patients—expanding to international trial sites.

Understood. And then on the PASTEUR Act, I don’t know—it's a bit out of your control, but what should investors be looking for regarding the next catalyst? Is there anything expected to come out regarding that?

As investors are aware, dealing with the government, the movements and approvals can be extremely difficult to predict. The antimicrobial working group meets every month and continues to deliberate on the timing for the PASTEUR Act’s passage. The best we can say is that it's looking promising for PASTEUR Light, but not for PASTEUR. PASTEUR Light, by itself, would be a significant opportunity for us. We believe there's a recognized need for public health, and that has been reinforced by various stakeholders. It has already been approved in the UK, which paves the way for us. It would certainly be ironic if this delay in enrollment leads us to an M&A situation where the PASTEUR Act is passed, and we could capitalize on that before executing a transaction. That would be ideal.

Jim, do we still have you?

Sorry, excuse me. Our next question comes from the line of Nick Meyer, a private investor. Please proceed with your question.

Good morning, David. One question on the IDMC and the data readout. Does the FDA have to approve the IDMC’s recommendation? Or are they left out of the loop?

Hi Nick. Good morning. Thanks for asking. No, the FDA is not involved any longer. They had to approve our amendment to the trial protocol and our related IND to provide for this IDMC mechanism, but that's it. The IDMC can make whatever recommendations they deem appropriate. The FDA won't review any of it until we submit an application for FDA approval.

Okay. And then the IDMC is only looking at the primary metric, which is clinical cure. They're not looking at the secondary metrics at all for the recommendation?

They're only looking at the primary endpoint of treatment, but they will also assess safety.

Yes. That makes sense. And then the last question I have is, what’s the value pivot between doing an M&A before Phase 3 versus going to the interim look on the first leg of Phase 3? What is your consideration there?

Well, I would reference the bioindustry guide, which provides a percentage likelihood of FDA approval at various clinical trial stages. For antibiotics, the likelihood of failure in Phase 3 is about 30% based on historical data. This likelihood decreases to 10% or 15% for drugs targeting gram-positive infections specifically. Presenting interim data on the first leg of the first Phase 3 trial could further reduce that failure rate by half. This presents a significant value enhancement, though market conditions might affect the final evaluations. The most significant factor will be the potential passage of the PASTEUR Act and our designation as a critical need antimicrobial, which would dramatically impact our sale price.

Okay. But is there a specific market value that you're looking for? Or is that going to be determined later?

Yeah, it’s going to be determined later. We will evaluate all offers based on their intrinsic value, and our board will consider whether the offer meets an acceptable range. We will likely engage banking advisors for fairness opinions to ensure that the terms are reasonable and bear the board's acceptance. It’s all going to be deal-related, and if we're trading at low evaluations, the board could choose to reject any undervalued offers.

Okay. That makes sense. All right. Thank you for answering the questions. I appreciate it.

No problem. Thank you, Nick.

Thank you. We have reached the end of our question-and-answer session. And with that, this will conclude today's teleconference.